EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER 2024.
CIC - Insurance Company Operations
Study Guide
Three types of Insurance Company and Management Stuctures - Answer✔✔-1. Stock Insurance
Company
2. Mutual Insurance Company
3. Reciprocal
Stock Insurance Company - Answer✔✔-an incorporated insurance company owned by STOCKHOLDERS
the stockholders elect the corporation's board of directors
stockholders may or may not be policy holders
What is the objective of a Stock Insurance Company? - Answer✔✔-To make a profit for its stockholders
Profits may be shared by forms of stock dividends or increase in stock value
Characteristics of a Stock Insurance Company - Answer✔✔-1. Capitalization
2. Reach is greater with regard to brand
3. Primary responsibility is to stockholders not policy holders
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4. Pressure on top line growth at the expense of profit
Mutual Insurance Company - Answer✔✔-incorporated insurance company OWNED by its
POLICYHOLDERS
Board of Directors is voted on by the policy holders
What is the objective of a Mutual Insurance Company? - Answer✔✔-to provide insurance at or near the
actual cost of doing business
if there is money left over in the form of profits it may be returned to policy holders as a dividend or
used to reduce future premiums
Characteristics of a Mutual Insurance Company - Answer✔✔-1. No Stockholders
2. Stable
3. Longevity in the market
4. Less pressure on the day-to-day results
Reciprocal - Answer✔✔-is a group of individuals or organizations called subscribers who join together
into an association for the purpose of insuring one another
What is the objective of a Reciprocal? - Answer✔✔-Subscribers insure one another in an insurance
application of "one for all, and all for one"
Characteristics of a Reciprocal - Answer✔✔-1. Insureds are also the insurers
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2. Specific to a niche or a single line of business
3. Less profit less pressure
4. May be more difficult to raise capital
Purpose of Establishing the Board of Directors - Answer✔✔-to make certain the investors and/or owners
interests are protected
What are the three Primary Obligations of Board Members? - Answer✔✔-1. Duty of Care - being prudent
and using due diligence (focusing on the facts)
2. Duty of Loyalty - keeping the interests of the company ahead of one's own interest
3. Duty of Obedience - Following by laws, state purpose of company, laws (may include disclosure of
conflict of interest, as required)
Company Culture - Answer✔✔-is the distinctive ethos of the organization - its the companies
"personality"
Values Statement - Answer✔✔-Commonly held values that define the company's culture and beliefs
Mission Statement - Answer✔✔-Short statment of the company's core and overall goal - why does the
company do what it does
The mission statement does: - Answer✔✔-1. Identifies the goal of its operations
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2. Communicates purpose and direction to employees, customers, etc.
Two types of Company Culture - Answer✔✔-1. Active Approach - leadership makes it happen -
intentional actions, clearly defined values
2. Passive Approach - happens overtime by employees observing behavior and values, based on the
behavior of management which doesn't always reflect written values
Types of Human Resources Considerations - Answer✔✔-1. Insurance Company Employees
2. Vendors or Third-Party Agreements
3. Blend of Emloypees and Third-Party Agreements
Insurance Company Employees - Answer✔✔-- Offers the greatest degree of control with employee
status
-Highest fixed cost for salaries and benefits
They key consideration for human resources is - Answer✔✔-the trade off of the degree of control VS
costs to hire talented employees
Vendors or Third-Party Agreements - Answer✔✔--Functions Performed
-Economically, the most efficient way when starting an insurance company or adding lines of business
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CIC - Insurance Company Operations
Study Guide
Three types of Insurance Company and Management Stuctures - Answer✔✔-1. Stock Insurance
Company
2. Mutual Insurance Company
3. Reciprocal
Stock Insurance Company - Answer✔✔-an incorporated insurance company owned by STOCKHOLDERS
the stockholders elect the corporation's board of directors
stockholders may or may not be policy holders
What is the objective of a Stock Insurance Company? - Answer✔✔-To make a profit for its stockholders
Profits may be shared by forms of stock dividends or increase in stock value
Characteristics of a Stock Insurance Company - Answer✔✔-1. Capitalization
2. Reach is greater with regard to brand
3. Primary responsibility is to stockholders not policy holders
Page 1/51
,EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER 2024.
4. Pressure on top line growth at the expense of profit
Mutual Insurance Company - Answer✔✔-incorporated insurance company OWNED by its
POLICYHOLDERS
Board of Directors is voted on by the policy holders
What is the objective of a Mutual Insurance Company? - Answer✔✔-to provide insurance at or near the
actual cost of doing business
if there is money left over in the form of profits it may be returned to policy holders as a dividend or
used to reduce future premiums
Characteristics of a Mutual Insurance Company - Answer✔✔-1. No Stockholders
2. Stable
3. Longevity in the market
4. Less pressure on the day-to-day results
Reciprocal - Answer✔✔-is a group of individuals or organizations called subscribers who join together
into an association for the purpose of insuring one another
What is the objective of a Reciprocal? - Answer✔✔-Subscribers insure one another in an insurance
application of "one for all, and all for one"
Characteristics of a Reciprocal - Answer✔✔-1. Insureds are also the insurers
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,EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER 2024.
2. Specific to a niche or a single line of business
3. Less profit less pressure
4. May be more difficult to raise capital
Purpose of Establishing the Board of Directors - Answer✔✔-to make certain the investors and/or owners
interests are protected
What are the three Primary Obligations of Board Members? - Answer✔✔-1. Duty of Care - being prudent
and using due diligence (focusing on the facts)
2. Duty of Loyalty - keeping the interests of the company ahead of one's own interest
3. Duty of Obedience - Following by laws, state purpose of company, laws (may include disclosure of
conflict of interest, as required)
Company Culture - Answer✔✔-is the distinctive ethos of the organization - its the companies
"personality"
Values Statement - Answer✔✔-Commonly held values that define the company's culture and beliefs
Mission Statement - Answer✔✔-Short statment of the company's core and overall goal - why does the
company do what it does
The mission statement does: - Answer✔✔-1. Identifies the goal of its operations
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, EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER 2024.
2. Communicates purpose and direction to employees, customers, etc.
Two types of Company Culture - Answer✔✔-1. Active Approach - leadership makes it happen -
intentional actions, clearly defined values
2. Passive Approach - happens overtime by employees observing behavior and values, based on the
behavior of management which doesn't always reflect written values
Types of Human Resources Considerations - Answer✔✔-1. Insurance Company Employees
2. Vendors or Third-Party Agreements
3. Blend of Emloypees and Third-Party Agreements
Insurance Company Employees - Answer✔✔-- Offers the greatest degree of control with employee
status
-Highest fixed cost for salaries and benefits
They key consideration for human resources is - Answer✔✔-the trade off of the degree of control VS
costs to hire talented employees
Vendors or Third-Party Agreements - Answer✔✔--Functions Performed
-Economically, the most efficient way when starting an insurance company or adding lines of business
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